Five of the biggest governance trends impacting business today
In the age of social media, when a rogue tweet could bring down an entire organization, companies have to be in-tune with the world around them. Brands that are successful in navigating risk and compliance know that it takes constant attention, especially with ever-changing priorities.
We recently had the opportunity to chat about modern governance with Dottie Schindlinger, co-author of Governance in the Digital Age, executive director of the Diligent Institute and co-host of the corporate director podcast for Diligent Corporation, as part of the TELUS International Studios podcast. Read on to learn the top five governance trends impacting businesses today.
1. Environment, social and corporate governance
Environment, social and corporate governance (ESG) is a collective evaluation of an organization's conscientiousness for environmental and social factors.
"That is an area that has just absolutely exploded in the last few years," Schindlinger explains. She continues, "We have the new U.N. report on the state of the climate. We have so many social movements that have been picking up steam, particularly during this time of a global pandemic when people are feeling restless and anxious. And, you know, the world is so uncertain. All of these things are coming to a head in the boardroom.
"Focusing on ESG and understanding what is our impact on the climate, what's our long term sustainability as an enterprise and how are we impacting our stakeholders beyond just the shareholders? What's the full impact on stakeholders? Having that clarity has become a big topic for boards."
2. Climate change
While climate issues are included as part of ESG, Schindlinger believes it deserves its own emphasis:
"Climate change, as I mentioned, is a big part of ESG, but it's also really got its own standing as something that has become much more critical. During the time of the pandemic, lots of organizations saw how climate also played a role in disrupting supply chains, changing workforce locations and employee health and welfare.
"I think it's really important that organizations are seeing climate change and climate risk as a major source of enterprise risk and really need to have better metrics and better insight into what's happening with their organizations."
3. Diversity and inclusion
It's no secret that a diverse workforce and leadership team makes good business sense. After all, diversity encourages creativity and innovation, which are key components to the strategies of the most disruptive and successful organizations in the world. Schindlinger continues:
"Another part of the ESG is diversity. Social programs for companies have been a big part of what they've been doing for a very long time.” But as businesses become more diverse, Schindlinger adds, “We have to be responsive to the needs and interests of all the stakeholders of the organizations that we serve.
"We can't just pretend that things are going to go on forever as they have. They shouldn't. We need to be responsive to the customers, the employees, the investors of our organizations. And so diversity, particularly in the leadership, in terms of gender, race, ethnicity, nationality, LGBTQ status, these things really matter. This is a strategic and competitive advantage for organizations if they want to be sustainable over the long term."
4. Cyber risk
Cyber security has always been an important, but with the global shift to a work-from-home model caused by the pandemic, key security considerations may have been overlooked in favor of adoption speed.
"We are seeing an explosion of cyber-crime all throughout the time of this pandemic," says Schindlinger. "Maybe not so surprisingly, because so many employees and leaders have had to work completely remotely. Companies are very hard-pressed to do an adequate job of cyber risk oversight. And so, again, that's an area that has really changed practices in the boardroom. Boards, really now understand they have to have as much sophisticated understanding of cyber risk as they do financial risk if their organization is going to continue to thrive."
5. Digital transformation and innovation
Last, but certainly not least, is digital transformation and digital innovation.
"You know, you've got to have boards be much more sophisticated on topics like AI and blockchain and cryptocurrency. Now, these are things now that are regular topics of conversation in boardrooms. And in fact, there's been some research recently to show that when boards have digitally savvy directors and they speak more frequently about these topics, those companies far outperform their peers. And so it's also become clearly a competitive advantage to think more innovatively and to really double down on digital technology and make your strategy digital first," Schindlinger concludes.
For the full interview with Dottie Schindlinger featuring Diligent's take on modern governance, check out the TELUS International Studios podcast.